Gaming is a massive entertainment industry bringing together millions of fans across the globe and is a creative opportunity for game developers to show off their skills. Yet for the companies active in the sector, it has become increasingly clear that gaming is also an opportunity for diverse revenue streams – not only through the sale of gaming titles, gear, or merchandise, but also through in-game monetization techniques. Why has monetization emerged as pivotal for the gaming industry, and where is it heading?
The brave new world of microtransactions
In the simpler times of the first home video game consoles, things were clear: players bought a gaming title that contained the whole of its content. Yet as the internet revolutionized the gaming industry along with most of our daily lives, a diversification of this approach gradually established itself. In an effort to create smaller revenue streams within a game that would allow studios to keep purchase prices relatively low, microtransactions were introduced.
In-game currencies took on the role of fiat currencies within the universe of a specific title, helping keep an illusion of separation between the two. The popular RPG game League of Legends was one of the first games to gain attention for its feature of Riot Points, which could be purchased with real money and then used to buy in-game upgrades and skins.
Microtransactions were also designed as a way to keep players engaged, mirroring the real world. But they were not always successful with players or the wider industry. One of the most controversial variants was the concept of loot boxes, which quickly gained popularity in games such as Star Wars: Battlefront II. Loot boxes were virtual crates filled with surprise rewards, including anything from the ability to tailor your avatar to rare types of weapons or armor that could prove a game-changer for the lucky player who got them. Though widely popular with some gamers, they were also criticized as providing an unfair advantage to some players, while certain unlockable features otherwise achieved through gameplay were near-impossible to attain without payment.
Free to play, but pay to upgrade
Although games are set in a virtual world, investing real money is crucial both to the gaming experience and to the revenue shifts of the industry. This is more obvious in online casinos, where the industry is built around the concept of players spending real money in the games. This is why they meticulously regulate banking and alternative payment methods that streamline deposits and payouts. By contrast, the wider video gaming industry does not have the same broader experience of dealing with players spending money in in-game transactions, as this approach has truly established itself only in the last decade or so. But the recent trends also show where the industry is heading.
The video gaming industry is constantly growing in size, and the competition between different studios is becoming more and more intense. In an era where players like to get a taste of a game before investing in it, free to play has risen to the forefront of the sector’s marketing approach. Popular games like LoL or Fortnite are free to play – and despite that, they make millions in revenue. A large part of that profit is owed to in-game microtransactions. This is a win-win for both studios and players, as developers can attract prospective gamers. Players, on the other hand, can test the waters and only start truly spending money on a title when they have engaged with its gameplay and are invested in the characters and narrative.
Then, in-game purchases become just another way to interact with this new virtual world – just like buying clothes or items in real life.